IRConcepts
Summer 2007
A Publication of
Industrial Relations Counselors, Inc.
IRConcepts is published by Indus-
Exploring Ways to Improve trial Relations Counselors, Inc.,
established in 1926 “to advance the
knowledge and practice of human
Labor-Management Relations
relationships in industry, commerce,
education, and government.”
Sydney R. Robertson
and Collective Bargaining
President
212-852-0403
sydney.robertson@orcww.com
Robert J. Freedman
At IRC’s Exploring Ways to Improve Labor-Manage- – Skilled workers needed by business who
Director of Research
ment Relations and Collective Bargaining Summit at are nonmilitant and can take care of 212-852-0404
ORC Worldwide’s headquarters in New York themselves, represented by the AFL robert.freedman@orcww.com
on March 6th and 7th, a group of experts and Industrial Relations Counselors, Inc.
– Unskilled, immigrant workers in service
practitioners in the field discussed the relation- 500 Fifth Ave
industries—labor’s traditional base—for New York, NY 10110
ship between management and organized labor
whom a more aggressive stance is an at-
in terms of its current state, the forces pressing IRC and IRConcepts are
traction, represented by the SEIU and trademarks owned by
upon it, and the outlook for its future. This Industrial Relations Counselors, Inc.
HERE
session built on dialogue about the future of
• Mergers & acquisitions at a continuingly www.ircounselors.org
collective bargaining at recent FMCS National
Labor-Management Conferences and may well frenzied pace, across industries and loca-
be part of a continued national dialogue and ac- tions
tion on these matters. • Outsourcing of both specific work and
workers
Organized labor today is a small and shrinking
part of the total workforce, and it is struggling • Cost explosion of traditional employ-
at a number of levels to find a more vital role ee benefits, particularly health care and
in the global economy. But the new forces in pensions
that economy are equally challenging to man- • Growing multiples between pay at the
agement, whether or not its own workforce is top and bottom, which encourages union
organized. These forces, which affect compa- militancy, and is contributing to the shrink-
nies across the spectrums of industry and size age of the middle class
along with their workers, were identified by the • The prospect of imminent change in U.S.
conference’s speakers and participants: political leadership, possibly reverting to
old-style political solutions for global busi-
• Globalization of both business and labor
ness and labor problems
competition
Each speaker presented his own unique perspec-
• Changing nature of the workforce that
tive on how these forces are influencing today’s
requires more educated, specialized em-
practice of labor relations and collective bargain-
ployees to compete in the growing informa-
ing, citing different examples ranging from the
tion economy rather than in the shrinking
shift in the basic structure of labor and manage-
manufacturing base
ment to a new model—management and labor
• Changing nature of labor from a monolith
working together in strategic partnerships to
to a reflection of the dual labor market:
achieve agreed-upon business goals.
IRC Industrial Relations
Counselors, Inc.
IRConcepts A publication of Industrial Relations Counselors, Inc.
The Future of Collective Bargaining as cases, the parties are increasingly even coming
an Institution: Perils and Prospects together over nontraditional, larger joint goals
such as police and fire agreements to improve
Joel Cutcher-Gershenfeld public safety, education agreements to improve
Professor and Dean, University of Illinois Institute of student performance, or industrial agreements
Industrial and Labor Relations to improve environmental outcomes.
Professor Cutcher-Gershenfeld pointed out He pointed out that there is especially the need
that, as a result of fundamental shifts in mar- to educate the workforce on business realities
kets, work, technology and society, the basic in today’s economy. There is a parallel need for
structure of the relationship between manage- employers and the general public to see collec-
ment and organized labor is shifting as well. tive bargaining as still able to contribute to the
A growing move to “bargain over how to bar- stability of a middle class in society. Basic ques-
gain”—reassessing the “rules of the game”—is of tions arise to what extent it makes economic
central importance in this context. sense to invest in education in these domains.
He has found that about 10 percent of labor-man- Will employers invest in educating a workforce
agement relationships are now on a transforma- on business issues given current high rates of
tional path that is designed to align strategic-lev- turnover (both voluntary and involuntary)?
el concerns and workplace-level concerns within Will education take place such that collective
the collective bargaining process. That path of- bargaining is not just seen as a private deal on
ten integrates essential workplace innovations wages, hours, and working conditions?
into enabling contract language through the ap- He concluded by pointing out that one key to
plication of interest-based bargaining (IBB) and more effective bargaining is communication be-
related methods for understanding fundamental tween and within the parties during all phases
interests as a context for bargaining. of the relationship—not just at the bargaining
While the net result of such transformational la- table. The Internet is a growing vehicle, for both
bor-management relations can be a new, strategic labor and management, to establish such ongo-
partnership between the parties, he reports that a ing communication. Essential in this process
greater percentage of labor-management relation- will be the same kind of standardization and
ships are going in the opposite direction. They have use of process disciplines as are found in quality
become more adversarial, with more divergence in improvement efforts and related initiatives. On
union and management views, less workplace in- the management side, top management—not
novation, and a fall-off in a preference for IBB. HR—needs to set a clear direction and policies
for the organization’s labor relations so that
Even in the contested context, many of the
local-level management can operate on firm
techniques involved in IBB are, he says, being
ground. For both labor and management, this
incorporated into a range of new approaches to
will involve shifts in the basic institution to
bargaining—not necessarily using specific labels.
match today’s global knowledge economy.
The parties are increasingly engaged in joint
training; joint data collection prior to bargain-
ing; pre-agreements on ground rules and a bar- Roads to Union–Management
gaining plan; use of facilitators and brainstorm- Collaboration
ing during bargaining; use of content experts
Michael Maccoby
and subcommittees during bargaining; new
Anthropologist, Psychoanalyst, and Consultant on
uses of electronic technology such as projecting
Leadership, Strategy, and Organizational Behavior
text on a screen and taking joint minutes; and
innovative ways to engage and calibrate con- Dr. Maccoby explained how the current system
stituents. In a limited, but important number of of union-management relations is based on an
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IRConcepts A publication of Industrial Relations Counselors, Inc.
outmoded reality—the industrial model of the Management (TQM), and quotes Tom Daven-
20th century—as the work, scope, and structure port, who said, “All knowledge-work organiza-
of today’s workplaces are subject to global eco- tion is experimental.” Ultimately, companies
nomic, social, and especially technological forc- and unions both have a profound interest in
es. (He points out that more jobs are lost to the being competitive and having good jobs in an
U.S. economy today due to automation than are ever-changing economy. And experiments in co-
due to outsourcing.) operation have led to better business results.
Improving union-management relationships to- In later discussion, he pointed out that the collec-
day needs to be part of the process of improving tive bargaining system, starting with the Wagner
work, according to economic and human val- Act, is built on something that no longer exists.
ues. This involves incorporating concerns about We have gone from industrial to knowledge work;
quality, productivity, and making work more automation, continuous process change, global
satisfying. One way to achieve the necessary col- competition have demanded agility, not inscribed
laboration between unions and management, he rules; and an every-three-year contract flies in
has found in his extensive work on union-man- the face of these new realities. Rather, employees
agement projects, is by focusing on the custom- involved in the work are required to participate
er—i.e., that which creates value. responsively, not by the book. Yet, he concluded,
many companies are not ready to go to the next
The nature of the relationship between the
level and cooperate with labor—they need to have
union and the company sets the tone for how
a compelling business reason to do so.
they relate to one another, and he suggests that
unions be considered a supplier—and treated
accordingly. That then puts the union in the
The Workplace of the Future
position of working to become the “supplier
of choice.” Similarly, some unions (such as the Hal Burlingame
International Union of Bricklayers and Allied Director, Industrial Relations Counselors, Inc.; non-
Craftworkers) have focused on continuous de- Executive Chairman, ORC Worldwide; retired Execu-
velopment of worker competencies while the tive Vice President, Human Resources, AT&T Inc.
American Federation of Teachers has a policy of
From the 1980s until 2000, AT&T prospered and
aiding professional development.
then rode the wave of change in the telecommu-
While “partnering” does not reflect the true nications industry with an innovative program
power relationship between the parties, he not- called Workplace of the Future, in which Mr.
ed, “collaboration” does—as it means working Burlingame played a central part. He described
together for a common purpose. He also noted the “virtuous circle” on which it was based, in-
that collaboration is in the interest of unions as tegrating the popular Economic Value Added
well as management—for example, in one case, (EVA) approach to organizational improvement
as a result of the establishment of a collaborative with two other elements—Customer Value Added
relationship with management, union member- (CVA) and People/Employee Value Added (PVA).
ship rose, from 65 percent to 85 percent. And, From EVA, investment flowed to employees; from
as the wage differential is receding for skilled employees work and service offerings flowed to
workers (due to demographically based short- customers; and from customers revenue flowed
ages), unions can “sell” prospective members on back to the company treasury.
benefits of education and quality work.
Focusing on the pivotal PVA segment of this
In doing such work, it becomes clear that there circle, he described a “new conversation” be-
are no final answers. He discussed the initial tween labor and management about the nature
excitement and ultimate disappointment of ef- of the employment contract, in which everyone
forts such as reengineering and Total Quality had to take a fresh look, and information had to
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IRConcepts A publication of Industrial Relations Counselors, Inc.
be much more widely shared. Management had said that labor relations is really about human re-
to open the books and unions had to abandon lations and that, despite being a classic “old-style”
notions of seniority and outdated, strict work manufacturing company, Harley has created and
rules. All this change required dedicated cham- maintained a partnership approach to labor rela-
pions on both sides who faced detractors on all tions—because they find it to be a value proposi-
levels of both sides. tion for the company. Today, after a tumultuous
financial history, Harley is a highly profitable, $6
Both Mr. Burlingame and Dr. Maccoby (who
billion organization with $1 billion of profit.
was the main consultant to the Workplace of the
Future program) agreed that what was really in- He described four key facets of the management
volved was less a traditional labor-management value proposition. First, a partnership works best
effort than a leadership development issue on where there is an equality of power on each side.
both sides. And Dr. Cutcher-Gershenfeld pointed Harley, dealing with both the Machinists and the
out that such an effort cannot work bit by bit—it Steelworkers unions, recognizes that power—and
has to be implemented throughout the organi- the fact that each side, in opposition, could really
zation, on three levels simultaneously: from the damage the other side. And so they find they are
top down, restructuring; from the bottom up, both better off working together.
energy; and in the middle, a strategic planning
Second, they find that a management-union part-
process for standards, and protocols as guiding
nership is better than any available alternatives.
principles. This effort facilitated performance in
There are an awful lot of working people in the
turbulent times and helped strengthen AT&T as
U.S. who need protection, he said—and they can
its industry structure was changing. Ultimate-
look to unions, government, or self-help (which
ly, it was this effort that—when the breakup of
he defined as “get a lawyer”). “I have not found
AT&T did occur—made possible a smooth tran-
unions to be unreasonable,” he said. “And they’re
sition process for the people at the company.
better than government or lawyers.” He, too,
Reinforcing Dr. Maccoby’s point that even the views unions as “suppliers,” and pointed out that
most effective organizational change efforts today companies don’t have adversary relationships
are temporary, Mr. Burlingame described how, with their other suppliers, so they shouldn’t with
when management change occurs, often there their unions, which is the company’s most long-
is a reversion to “old style” labor-management lasting supplier relationship.
relations, and what had been built over decades
Third, with Harley’s cooperative history, they
took just a moment to be shattered. Yet today, as
are able to get the participation of their work-
AT&T has now been reunited with SBC, it seems
force in solving problems—getting people’s
as though “SBC is attitudinally in this space, ap-
brainpower as well as brawn. He said that, by
proaching labor issues in a pretty constructive
and large, 20 percent of employees will love a
way.” The biggest challenge they will face with
company, 20 percent will hate it—and it’s that
this is the new power of the financial markets that
middle 60 percent that a strong relationship
look only at EVA and are not attuned to the day-
with a union can help engage.
to-day reality of organizations’ operations.
Finally, he said, when management offers a
partnership approach, it benefits from a higher
The Case of Harley-Davidson quality of union leadership. (As the adage goes,
“A company gets the union it deserves.”) An ad-
Stephen Weidman versarial environment encourages an adversari-
Director, Corporate Labor Relations and Human al union, but when union leadership is involved
Resources, The Harley-Davidson Motor Company in both business issues and in operations, the
While acknowledging the unique, “egalitarian company benefits from their knowledge, skills,
biker” culture of Harley-Davidson, Mr. Weidman and leadership.
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IRConcepts A publication of Industrial Relations Counselors, Inc.
At Harley, all union presidents and all general often made through better labor relations—by
managers are policy-setters, sharing all informa- partnering with the company’s unions to find
tion and operating pragmatically, with mutual and implement better ways to work, to everyone’s
respect and trust, to engage in mutual problem eventual benefit. Despite the potential benefits
solving. It is management by influence rather of labor-friendly private equity only 3 percent
than authority—a consensus culture, in which of multi-employer pension plan assets are in-
some decisions are made by management, some vested in private equity compared with 6 percent
with union input, and some are made jointly. of corporate pension plan assets and 15 percent
Union members work with nonunion workers of endowment fund assets. Mr. Sleigh cited the
on training and other operational activities, example of Spirit Aerosystems as a successful
while some plant managers and union presi- private equity investment that created value for
dents manage plants without supervisors. investors, managers, and employees.
He said that the partnership culture is so in- He pointed out that these relationships, like any
grained into the company that even if new lead- others, are not necessarily forever-after. But each
ership came along and wanted to change it, that party sees it to be in its interest to cooperate—as
would be very difficult. And yet Harley did re- long as everyone else does. And one of the knot-
cently have its first strike in 15 years—over the tiest issues is CEO compensation, particularly
issues of health care and legacy costs, which Mr. as workers may be agreeing to take wage cuts.
Weidman pointed out are the two intractable is- But unions are recognizing how such buyouts
sues facing every large employer in the nation, can be in their interest—and so the private eq-
ones that cannot be solved on an individual uity fund is now getting leads from unions as
company basis. to underperforming companies that could be
turned around in a buyout. A buyout by a labor-
friendly private equity group can spur a radical
A New Private Equity Path transformation of labor relations that otherwise
is unlikely to occur.
Steve Sleigh
Principal, The Yucaipa Companies LLC; former
Director of Strategic Resources, International
Barriers to Management and Union
Association of Machinists and Aerospace Workers
Change
While the pure bottom-line-results orientation
of today’s financial markets was mentioned by William P. Hobgood
many at this conference as in opposition to la- Arbitrator, Mediator, and former Vice President,
bor-management harmony, Mr. Sleigh demon- United Airlines
strated that enhanced profitability and cooper- Taking a balanced look at both sides of the bar-
ative work modes can productively coexist. The gaining table, Mr. Hobgood notes that the signs
private equity firm of which he is a principal be- of a bad relationship are obvious: a high griev-
gan with the purchase of a California supermar- ance level, protracted bargaining, low produc-
ket chain that was carried out with the approval tivity, public conflict, and strikes. But, drilling
of its unions and which, in private hands, con- down, he points out that the root causes of such
tinues to work cooperatively with its unions. results come from deficiencies in both manage-
As with any private equity fund, institutional ment and labor leadership.
investors put up capital and the fund looks for Some of the realities that hinder good relations
underperforming public companies to purchase, include the fact that most change efforts ignore
to improve their operations, and to sell back to the political character of collective bargaining,
the capital markets at a profit. The unique ap- and management either doesn’t understand or
proach of this fund is that the improvements are ignores the union political structure. Both em- 5
IRConcepts A publication of Industrial Relations Counselors, Inc.
ployer and union leadership are often reluctant can sometimes be healthy, he says, in “clearing
to go past their traditional roles, and show little the air” and reminding the parties of their mu-
willingness to assume new and broader respon- tual needs, tempering employers’ narrow focus
sibilities. Management leadership tends to have on stockholder value and unions’ narrow focus
a quarterly mind-set, while union leaders are on extracting the “last drop of benefits.”
largely elected as adversaries to management.
Sometimes, he said, the real results of a strike
Management often underestimates the invest- do not favor the winner. He cited situations in
ment in time and money necessary to put the which the company put up a strong fight, and
relationship on a more cooperative footing— won on all issues—only, after the strike, to find
with processes such as team building and inter- that morale had plummeted and turnover had
est-based bargaining that need to be leadership soared. And the company learned to look to inter-
driven, typically by management, to improve est-based bargaining as a better alternative than
the bargaining relationship. Often such efforts the traditional take-no-prisoners stance, thereby
are focused on activities rather than outcomes coming to a good outcome for all concerned.
and the role of supervisors, who need to be key
On the other hand, he cited unhappy cases,
players, is ill defined.
such as when United entered into its disastrous
Yet there are positive pointers to better relations. ESOP plan—and when AT&T sold off a manu-
While they are neither necessary nor sufficient to facturing plant to management as the wire and
improve labor-management relationship, exter- cable industry was shrinking. He was put on the
nal threats such as global competitive pressures board as the union representative, but the com-
can serve to encourage constructive change. So pany was again sold, and finally sold again, to
can recognition of the fact that each of the par- be liquidated.
ties needs the other to succeed. And once the de-
Echoing other speakers, he remembered ex-
sire to improve the relationship exists, effective
amples of labor-management cooperation that
conflict resolution systems can be applied, along
worked beautifully—for a time, including Chrys-
with a focus on real performance that includes
ler and AT&T.
provision for profitability, institutional security,
and job security. He was active on the AFL-CIO Committee on
the Evolution of Work in the 1980s and 1990s,
a group designed to orient the labor movement
A Union Leader’s Outlook to serving its members. Its Third Report was
published in 1994 as a call to partnership, a step
Thomas R. Donahue beyond cooperation. While 35 national union
Former President and Secretary/Treasurer, AFL-CIO presidents signed up to the report, they could
After a lifetime of union involvement, Mr. not shift the membership and now, 13 years later,
Donahue has concluded that employers and they are still talking about the way ahead.
unions have much more in common than their Summing up, he said that five basics have to be
differences, and that partnerships—which he in place for cooperative arrangements to succeed:
terms mature bargaining relationships—reflect finding a willing partner; acquiring the tools to
those commonalities. They work, he said, when make it work; developing communications skills
each party remains true to its base, representing to sell it up and down both the corporate and the
the interests of their side, while respecting the union sides; recognizing limits—that, as in any re-
other side. lationship, there will always be stresses; and hav-
While he has seen many successful efforts at ing dedicated people to make it work. And he said
learning to live and work together, he says there that the biggest barrier to the use of interest-based
are still appropriate moments for a strike. These bargaining is the issue of cost, on both sides.
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IRConcepts A publication of Industrial Relations Counselors, Inc.
He left the group with a basic philosophical ques- ments and expanded membership), with union
tion he said he has spent a long time thinking members learning to be proactive, demonstrat-
about and to which there is no obvious answer: ing their vested interest in the success of their
Considering both the traditional legal “master/ company.
servant” relationship of management and labor
In 2000, the spirit of cooperation extended to
and the practical unity of the work of the job
the bargaining table, where the two sides deter-
and the person doing it, who “owns” the job—the
mined to institute a facilitated, single, national
worker or the management?
“interest-based negotiation” process, in which
various task groups engaged in joint study,
problem-solving, and negotiations on subjects
Case of Kaiser Permanente
ranging from quality and service to work-life
Peter diCicco innovations to wages and benefits—and then
Former Executive Director of the Coalition of Kaiser submitted recommendations to a centralized
Permanente Unions common issues committee. Ultimately, the na-
tional agreement and derivative local contracts
In 1996, Kaiser Permanente (KP), America’s lead-
were ratified by substantial margins—92 per-
ing not-for-profit, fully integrated, and highly
cent overall.
unionized health maintenance organization,
was facing some difficult challenges. Both its Working to improve ongoing operations, the
management and staff were suffering from the partnership follows two strategies: applying the
prevalence of the growing unpopularity of man- partnership principles and process to address
aged care and from the explosive growth of non- specific, “naturally occurring” events or crises;
union, for-profit health care companies. And so, and an incremental, steady, planned diffusion
having suffered a bitter strike in the late 1980s of those principles and process across the or-
and early 1990s that nobody won, the company ganization, guided by extensive investment in
began to work toward a genuine partnership education and training of managers, union rep-
with its unionized employees—not simply coop- resentatives, and employees.
eration or a new labor strategy, but a joint rec- He noted that the interest-based bargaining
ognition of the need for fundamental change in process can seem frustrating because it takes a
order to meet their mutual goals of making life long time to take hold. It’s slow at first, he said,
better for their customers and communities. but when it takes off the results start multiply-
The union leaders, representing most staff ing. So both sides really have to be committed
except doctors, and senior KP executives de- to slogging on to make it work.
veloped a partnership agreement through an All of this has worked. In 1998-1999, KP enjoyed
intensive negotiation and problem-solving pro- a turnaround in its financial performance—and
cess that took most of 1996 and into 1997. The designed and opened a brand-new hospital in a
toughest issue after job and union security was new California location incorporating improve-
that of leadership: the scope of shared decision ments in physical design and in the flow of pa-
making. The unions gained the right to input tient care that came out of the joint effort. At
(not veto) at the highest level: its representative that and other facilities, a wide range of mea-
sits in on meetings of the board and all its com- sures, from financial results to patient care to
mittees except compensation, with both sides health and safety, rose and continued to rise year
respectful of their determination to achieve to- after year. And a 2005 union survey of members
tal transparency and confidentiality. showed dramatic improvements from 1998 in
Working down from there, management and their attitudes toward their job, attitudes that
labor worked together to achieve agreed-upon are critical to the quality of patient care, and the
business goals (such as service quality improve- competitive success of the organization.
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IRConcepts A publication of Industrial Relations Counselors, Inc.
Examples of Strategic Labor–Manage- gagement, essential to improving performance
ment Partnerships results. High performance requires discretion-
ary effort and judgment, which will not appear
Thomas J. Schneider unless the people who know and have to execute
President, CEO and Founder, Restructuring the work feel engaged, a sense of ownership, in
Associates Inc. it. The most critical concept is that cooperative
Also involved in the case of Kaiser Permanente labor-management relations must be a core busi-
detailed by Peter diCicco, Mr. Schneider related ness strategy, line-driven rather than driven by
several examples of burgeoning partnerships. HR or labor relations staff.
Catholic Healthcare West has 44 hospitals in
California, Nevada, and Arizona, with 40,000
Best Practices in Interest-based
employees whose staff and nurses had been
Bargaining
organized since 2002 by the SEIU. Facing stiff
competition, particularly from Kaiser Perman- Michael Gaffney
ente, in 2006 they agreed to form a labor-man- Mediator, Facilitator, Educator; Consultant,
agement strategic alliance to simultaneously Restructuring Associations; formerly Cornell
redesign three hospitals and the delivery of University School of Industrial and Labor Relations
care—all systems, processes, and jobs—in Las
Dr. Gaffney pointed out that prior to the intro-
Vegas, starting with a clean slate rather than in-
duction of interest-based bargaining (IBB) to in-
stituting incremental change. The initial meet-
dustrial relations in the mid-1980s; there was no
ing with representatives of labor and manage-
way to connect then emergent structures of la-
ment took place in July 2006 and in just seven
bor-management cooperation with mainstream
months committees were formed, had identi-
industrial relations activity (contract bargaining
fied initial functions, processes, and problems
and contract administration). Collaboration be-
for redesign to improve performance, and had
tween management and union prior to the 1980s
gained the approval of the steering committee.
was relegated to parallel structures specifically
Now they are beginning to carry out their coop-
enjoined not to address issues having to do with
erative endeavors. One of the goals is to become
terms and conditions of employment, i.e., the
a “Magnet” hospital, one deemed so by nurses
important stuff. IBB provided a means by which
as a best place to work; this status both attracts
the parties could move the ethos of collaboration
the best nurses and, therefore, attracts doctors
from the wings into the mainstream.
and patients as well.
FMCS data earlier cited by Dr. Cutcher-Gershen-
The management and SEIU at Allina Health-
feld demonstrates how significant that penetra-
care, the largest health care delivery system in
tion has been, awareness and use of IBB tending
Minnesota, have now worked jointly for a year
upward. That same data, however, also indicates
on specific important performance-related
recurrent problems with IBB application and some
challenges by means of a process that not only
recent slippage in terms of bargainer preference
focused strongly on communicating their mes-
for this approach. While it is likely that this loss
sage throughout the organization, but also
of ground may have been due in part to difficult
trained all middle and lower-level managers and
economic conditions during the survey period, it
stewards in alternative dispute resolutions pro-
is Gaffney’s opinion that the problem lies as well
cesses and effective conflict resolutions skills,
within the IBB method itself—or at least within
and jointly trained management and stewards
a version of IBB which borrows heavily from the
regarding contract interpretation.
organizational development values and practices
In these and other workplaces, he said, the core of the mid-1980s—from which environment the
business strategy is strategic and operational en- early champions/trainers/consultants emerged.
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IRConcepts A publication of Industrial Relations Counselors, Inc.
This version of IBB asks for behaviors, which There was no attempt to generate a consensus
in Gaffney’s opinion, are unrealistic in many view from summit participants, but ORC staff
bargaining settings (particularly those en- came away with the following thoughts about
tailing low to only moderate levels of trust, a union and management efforts to improve their
modicum of training, and no external facilita- relationships.
tion), resulting in frequent disappointment.
1. The process should commence with an
Gaffney mentioned a number of unrealistic
in-depth joint review of what each party
components of this version of IBB which he
hopes to get out of the changed relation-
dubbed “fragile” (prohibition of positions,
ship and whether the hoped-for benefit
prohibition or discouragement of caucuses,
is worth the cost. In this respect, manage-
no or low tolerance of display of emotion, im-
ment and unions may need help in devel-
plicit assumption that a win/win solution can
oping a joint vision of the future. Are the
be achieved in every instance and consequent
visions of a desired future consistent? If the
lack of instruction on how to deal with distrib-
price of union participation is management
utive/monetary issues).
neutrality in organization drives and recog-
Gaffney recommended an alternative “robust” nition on the basis of an authorization card
version of IBB that was much more sober in these check, rather than an election, is manage-
regards. The subsequent discussion among the ment willing to agree to that?
summit participants focused primarily on one 2. The arrangement needs to function at
issue—whether or not the absence of positions corporate, strategic business unit, and
was the sine qua non of IBB. workplace levels, to address strategic,
collective bargaining, and workplace is-
sues. Piecemeal approaches are not likely to
Going Forward and Some Concluding be successful; relations at one level are syn-
Thoughts ergistically influenced, for good or for bad,
by relations at other levels.
Conference speakers and attendees alike agreed
on a number of issues: 3. Issues need to be sorted out in terms of the
manner in which they are to be addressed:
• Management and organized labor need management decides and informs the
each other to keep their organizations com- union, management seeks input from the
petitive in today’s harsh business climate. union and decides, decisions are shared
• Mutual respect and a willingness to work in some manner, etc. Potential bumps in
hard in understanding each party’s objec- the road need to be anticipated and provided
tives are essential. for: management believes a decision must be
• Transparency and information-sharing are made too rapidly to allow for consultation
the necessary foundations of mutual trust. or bargaining, major outsourcing, facility
• A huge hurdle is the fear of change in tradi- closure, shifts from interest-based to tradi-
tional roles. tional bargaining, etc.
• Continuing, intensive communication is 4. Planning for education, training, and
essential in three domains: communication activity is needed. Train-
ing in interest-based bargaining may be re-
– Within management, starting with the
quired. Union members and representatives
full education of the CEO
often need better understanding of P&L
– Within union membership statements, etc. Managers in functions oth-
– Between management and union er than HR often need to be sensitized as
membership to behavior that will lead to a union’s aban-
donment of a cooperative arrangement. 9
IRConcepts A publication of Industrial Relations Counselors, Inc.
Minimum standards of dialog frequency account in the management reward system.
for each level should be set. 6. The effort to improve relationships can-
5. Each party needs to examine its own in- not be based on wishful thinking (in-
ternal arrangements as they relate to the stantaneous transformation; the ups and
relationship. The union will have to find downs of relationships can be ironed out;
ways to prevent an opposing faction from us- fostering relationships can eliminate win-
ing successful labor-management collabora- lose issues). Nevertheless, the search for
tion as coziness warranting regime change. common ground and improved relation-
Management should consider whether and ships can be fruitful.
how to take relationship performance into
About IRC and ORC Worldwide:
In the wake of the Ludlow Massacre in the Colorado and European experience with unemployment insur-
minefields of 1917, John D. Rockefeller, Jr., created an ance in the establishment of the federal social securi-
organization to foster improved employer/employee ty system and the design of unemployment insurance
relations—Industrial Relations Counselors, Inc. (IRC). in the United States. IRC was also deeply involved in
Incorporated in 1926, it was the first research organi- advancing the interests of progressive employers in
zation in its field. the formation of national labor policy.
IRC advocated the establishment of employee repre- Between 1927 and 1932 IRC was the official represen-
sentation plans, which involved employee-elected rep- tative of American business to the International La-
resentatives and regular meetings with management to bour Office in Geneva, and conducted research there
discuss matters of mutual interest. The idea was greeted on employment issues in several European countries.
with less than enthusiasm by many of Rockefeller’s fel- IRC research has also dealt with all aspects of collec-
low industrialists, but it led to his conviction that there tive bargaining policy, remedies in emergency dis-
could be a “unity of interest” between labor and man- putes, executive retirement, and job evaluation. For
agement—it was not always necessary for one party to many years IRC’s own management development and
lose in order for the other to win; win-win arrangements education courses broadened the expertise of human
and agreements were possible. resources professionals and increased line managers’
understanding of employee relations issues. Periodic
IRC continues to be dedicated to its original objective:
IRC symposia bring together business leaders and
“To advance the knowledge and practice of human
academic researchers to review HR topics of mutual
relationships in industry, commerce, education, and
importance.
government.” IRC’s work has been guided over these
80-plus years by a board of trustees comprising distin- After several decades, IRC spun off its for-profit com-
guished leaders of American industry. pany that is today known as ORC Worldwide. Since
1953, ORC has served to assist clients, primarily For-
IRC became an exemplar of the progressive manage-
tune 500 firms, with specialized knowledge and advice
ment view that labor and management, while adver-
about human resources management.
saries, had common interests and that it was the task
of the industrial relations function to seek ways to For further information about IRC and ORC’s activi-
establish this unity of interests. From its inception, ties in the labor and employee relations field, please
IRC has conducted innovative research and pro- contact Thomas Connors, Senior Vice President, ORC
duced publications that have broken new ground in Worldwide at 212-719-3400.
the employee relations field. In the 1930s, legislators
drew on IRC expertise concerning pension systems www.ircounselors.org
10
IRConcepts A publication of Industrial Relations Counselors, Inc.
Agenda
Welcome A New Private Equity Path
Hal Burlingame, Director, Industrial Relations Steve Sleigh, Principal, The Yucaipa Companies LLC,
Counselors, Inc. former Director of Strategies Resources, Internation-
Fiona Webster, Director, International and Social al Association of Machinists and Aerospace Workers
Labor Affairs, ORC Worldwide
Intra-Organizational Bargaining:
The Challenge for the Institution of Insider and Outsider Perspectives
Collective Bargaining
William P. Hobgood, Arbitrator, Mediator and
Joel Cutcher-Gershenfeld, Dean and Professor, former Vice President, United Airlines
University of Illinois Industrial and Labor Relations
Center
A Union Perspective
Thomas R. Donahue, former President and Secre-
Successful Intervention in the
tary/Treasurer, AFL-CIO
Workplace
Michael Maccoby, Anthropologist, Psychoanalyst
The Kaiser Permanente Experience
and Consultant on Leadership, Strategy and Organi-
zational Behavior Thomas J. Schneider, President, CEO and Founder,
Restructuring Associates Inc. and
Peter diCicco, former Executive Director of the
The Workplace of the Future Coalition of Kaiser Permanente Unions
Hal Burlingame, non-Executive Chairman, ORC
Worldwide and retired Executive Vice President,
Group Discussion of Thoughts and
Human Resources, AT&T Inc.
Experiences Addressed So Far
Rory Mullett, ORC Worldwide
The Harley-Davidson Motor
Company Experience and Relationship
Transformation Situations Getting to Real: Second-Generation
Interest-Based Bargaining
Stephen Weidman, Director, Corporate Labor Rela-
tions and Human Resources, The Harley-Davidson Michael E. Gaffney, Mediator, Facilitator, Educa-
Motor Company tor and Consultant, Restructuring Associates,
formerly Cornell University School of Industrial
and Labor Relations
11
IRConcepts A publication of Industrial Relations Counselors, Inc.
Descriptive Bibliography
Appelbaum, Eileen (Rutgers) & Hunter, Larry some form of “partnership,” but fewer than 3
W. (Wisconsin-Madison), Union Participation in percent of them were strategic.
Strategic Decisions of Corporations, NBER Working Arrangements negotiated by the IBEW, CWA
Paper 9000 (March 2003), & IBW, USWA, and IAMAM are discussed. The
http://www.nber.org/papers/w9590 CWA/IBEW/AT&T Workforce of the Future is
discussed in greater detail in Agents of Change by
This paper looks at the subject primarily from Heckscher et al., digested below. The USWA and
a union point of view. Its table, “Choices Facing IAMAM arrangements follow here.
Union Leaders in the Design of Institutions for In 1992 the USWA adopted a “New Directions”
Strategic Partnership” (on the following page) is bargaining program, seeking “an ongoing voice”
particularly valuable. in decisions affecting the shop-floor, plant, and
Strategic partnerships are unlikely to evolve from corporate performance. Its main provisions in-
other partnerships or employee involvement pro- cluded no layoffs, involvement in workplace and
grams, and they raise dilemmas for unions. At the corporate decisions, restructuring to increase
local level, unionists have to reinterpret and rede- flexibility, improving productivity and reducing
fine their roles and convince the membership of costs, neutrality, and card check. These provi-
the values associated with cooperation. Involve- sions were negotiated with the major integrated
ment at more strategic levels is more problematic. companies in the 1993-94 round and renegotiat-
Responsibility without corresponding authority ed in 1999. Contracts with other steel companies
is unattractive. Will management share enough to “contained many of the substantive features.”
make the arrangement influential? Will manage- The authors report variations in implementation
ment take action inconsistent with the arrange- from company to company but an overall posi-
ment under pressure? tive effect despite union and management skep-
ticism as to whether the arrangement can live up
The primary incentive for union involvement
to expectations with respect to union participa-
is the viability of the firm, but the arrangement
tion in top-level strategic decisions.
is unlikely to be able to address the turbulence
outside the firm that seems to be endemic to the The IAMAM has High Performance Work Or-
current economy. To gain worker support, the ganization (HPWO) Partnerships at about 50
arrangement must provide not only employment facilities (out of several thousand), including
security but union institutional security. Man- Harley Davidson. The IAMAM is looking for:
agement neutrality with respect to organizing [1] a business plan incorporating long-term re-
and outsourcing prohibition may be required. turns, market expansion, and workforce growth,
History does not appear to support the notion [2] accurate accounting of all activities support-
that innovative union-management arrange- ing the firms products/services, and [3] changes
ments have provided greater security. in process to improve quality and productivity.
Extensive education, training, and planning are
Organizing the arrangement in terms of link-
involved; several years of relationship explora-
ages with union structure and including all rel-
tion may precede an agreement. Beyond growth
evant parties can be difficult. An international’s
and joint decision-making, the IAMAM seeks
responsibilities with respect to a particular firm
employment security and an education and com-
and the industry may be conflictual.
munication plan for all employees.
A study of CBAs expiring between 9/1/97 and
The paper also includes a fairly extensive section
9/30/07 found that about 47 percent contained
on union membership on boards of directors.
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IRConcepts A publication of Industrial Relations Counselors, Inc.
Choices Facing Union Leaders in the Design of Institutions for Strategic Partnership
Type of Choice International International or Local Union
Union Local Union
Establishment of partner- Does the international Does the union bargain Should workers buy stock
ship union advocate part- for partnership struc- in their own company?
nerships as a matter of tures? Should partnerships
policy? If management is reluc- accompany concession
Does the union support tant to agree, how much bargaining?
board seats? is partnership worth? What role should employ-
Does the union support How should future or- ment security guarantees
negotiated strategic part- ganizing campaigns and play in the partnership
nerships? acquisition of nonunion agreement?
What policy should the operations be handled?
union demand of the
company with respect to
subsequent organizing
campaigns?
Identity of union repre- Should active interna- What criteria will be used Who will the representa-
sentatives in strategic tional union leaders be to select representatives? tives be?
level decisions permitted to involve
themselves in governance
decisions of individual
companies?
Continuing support for Will the international Will the union attempt Will structures be estab-
representatives union provide training to coordinate with or lished for communication
and technical support for instruct the representa- between representatives,
the representatives? tives? local union leaders, and
local members?
Beaumont, Phillip B. & Hunter, Laurence C, both nition of legitimate interests, [3] commitment to
with the University of Glasgow, “Collective Bar- employment security, [4] focus on the quality of
gaining and Human Resource Management in working life, and [5] adding value.
Britain: Can Partnership Square the Circle?” in
The authors say that the profile of the sort of or-
Kochan & Lipsky, Negotiations and Change: From the
ganization to successfully adopt the partnership
Workplace to Society (Cornell 2003), p. 161
approach is one that:
Much of this article seems to have little relevance 1. Is under competitive/performance pres-
to the U.S. labor-management situation, but a sure
couple of aspects are worth noting. 2. Sees HRM practices as a major way to re-
spond to pressure
The Trades Union Congress has created a TUC
Partnership Institute, which has defined partner- 3. Is relatively highly unionized
ship in terms of six principles: [1] shared commit- 4. Has unions not historically hostile to the
ment to the success of the enterprise, [2] recog- HRM
13
IRConcepts A publication of Industrial Relations Counselors, Inc.
5. Has an existing relationship that needs reversion to traditional bargaining okay. There
fixing but isn’t hopeless are three phases: [1] option generation á la IBB
6. Has a management that sees the distinc- but without the necessity of agreeing to stan-
tion between negotiating and employee- dards or criteria for evaluation; [2] sharing inter-
management relationships and is willing ests and proposal exchange on non-economic is-
to invest in both sues, followed by traditional bargaining thereon;
7. Has a management that understands [3] an interest approach to economic matters,
that unions can’t sell change if they followed by traditional bargaining on all remain-
haven’t been involved in the design of the ing issues. Unlike IBB, there is no requirement to
change completely share information or for consensus,
but it does encourage information sharing.
8. Has an international, as well as a local,
that is welcome in the design process The article provides greater detail on IBB and
9. Addresses issues of concern to the repre- its predecessor “PAST” approach. The essential
sented early message with respect to IBB is akin to “no pain,
10. Needs early success no gain,” it offers substantial benefits provided
the parties are willing to live with its disciplined
See Appendix A for a 6/22/04 speech by Ron Bloom,
approach and invest the time it requires.
Special Assistant to President, USWA, to a manage-
ment group setting forth what the Steelworkers look for The basic idea is that there is no one approach
in a relationship with management. that is better for all parties and situations (one
size doesn’t fit all). Hence FMCS offers four mod-
els ranging from traditional bargaining to IBB
Brommer, Buckingham, Loeffler (FMCS Com- with a couple of choices in between.
missioners and Deputy Director), Coopera-
tive Bargaining Styles at FMCS: A movement
Cooke, William N., Labor-Management Coopera-
toward choices”, http://www.fmcs.gov/
tion: New Partnerships or Going in Circles? (Upjohn
internet/assets/f iles/Articles/Pepperdine/
Institute for Employment Research 1990)
CBStylesatFMCS.pdf
This book addresses the literature; presents
This article compares and contrasts:
original survey findings that reflect different
• traditional bargaining perceptions of local union leaders, national/in-
• enhanced cooperative negotiation (ECN) ternational union officers, plant management,
• modified traditional bargaining (MTB) and corporate management; provides a statisti-
cal assessment of the survey results; and presents
• interest-based bargaining (IBB)
the observations of an individual who knows
As indicated by the ordering above, ECN is clos-
his subject matter. The findings seem somewhat
er to traditional bargaining than MTB, which is
overwhelmed by the methodology. In addition,
closer to IBB than ECN.
Cooke sees management as having to choose
ECN entails [1] mediator-facilitated issue prepa- among union-avoidance, cooperation, or a mix
ration and exchange, [2] proposal preparation of the two strategies and doesn’t focus enough
and exchange, and [3] traditional bargaining. on the balance between traditional/distributive
It requires less training of the participants than bargaining and cooperation. Management could
MTB or IBB. choose to deemphasize cooperation and empha-
size hard-nosed traditional bargaining in the be-
MTB requires more training than ECN but less
lief that this is the way to a better deal rather than
than IBB. It entails more focus on interests than
because cooperation is inconsistent with union
traditional bargaining. In effect the process
avoidance. In summary, following is a distillation
starts the parties on an interests path but makes
14
IRConcepts A publication of Industrial Relations Counselors, Inc.
of some key points. (For all of the listed benefits Potential costs to employees include:
and costs, Cooke cites relevant literature.)
1. working harder, not necessarily smarter
Potential benefits of cooperation to manage- 2. displacement or loss of employment from
ment include: increased productivity
1. increased productivity and efficiency 3. unwanted peer pressure to be involved or
2. improved quality not involved
3. improved customer relations and service Potential benefits to union leaders include:
4. reduced waste and rework 1. credit from members for improvements
5. reduced overhead, materials, and mate- 2. more influence in management decisions
rial handling costs 3. improved communication with manage-
6. enhanced supplier service ment
7. improved communications 4. reduced day-to-day contract administra-
8. improved relations between supervisors tion problems
& employees 5. greater member involvement in union af-
9. reduced grievances and disciplinary action fairs
10. stronger identity and commitment to Potential costs to union leaders include:
company goals 1. perceived cooptation by management
11. reduced absenteeism, tardiness, and 2. undermining of traditional roles of
turnover unions and collective bargaining
12. increased organizational flexibility and 3. heightened political conflict over leader-
adaptability ship role
Potential costs to management include: 4. increased uncertainty of reelection
1. added costs to reorient and train manag- 5. loss of member commitment and union
ers, employees, and union representatives influence
2. perceived loss of authority and status Trust and commitment to cooperation are criti-
3. displacement or loss of employment for cal and interrelated. Neither is easy to develop.
middle managers and supervisors Disenchantment and demoralization readily fol-
4. wasted time spent in meetings low when hoped-for gains are not achieved. Bal-
ancing cooperation and traditional bargaining
(5. Cooke does not list slower response time
is difficult. Many of the benefits of cooperation
resulting from need to consult)
are hard to measure, as are some of the costs of
Potential benefits to employees include:
traditional bargaining (e.g., morale, distrust, in-
1. intrinsic rewards from participation/in- security).
volvement
Factors consistent with perceived successful
2. more say in how work gets done cooperation (These statements may be seen to
3. improved working conditions oversimplify Cooke’s heavy data.):
4. more money from gainsharing and other • high union leader participation
incentives
• frequent team meetings
5. improved supervisor-employee relations
• committee-based programs
6. quicker resolution of problems; reduced
need to grieve Factors consistent with perceived lack of success:
7. hightened dignity, self-esteem, and pride
• continued employment loss
in work
• subcontracting 15
IRConcepts A publication of Industrial Relations Counselors, Inc.
• low union leader participation 3. Fewer than 10 percent of relationships
• infrequent team meetings report that transformative efforts have
To make cooperation work: resulted in cooperative and improving re-
lations.
• build in a problem-solving mechanism such
Two possible implications are derived. One is
as fact finding, mediation, or arbitration
that there is no need to transform traditional
• attempt to reach, up front, a consensus of bargaining and adversarial relationships. The
standards of behavior in relation to trust other, favored by the authors, is that the context
and commitment in which the relationships exist and the bargain-
• agree that when either party perceives the ing takes place is changing and there is a corre-
other isn’t meeting trust/commitment sponding need for the institution of collective
standards, it will be immediately brought bargaining to change or innovation will be mini-
to the other party’s attention mal and decline will be steady and long-term.
• identify where and how much union input
A selection of the salient observations follows:
to company decisions is expected
• agree as to how union input contributes to • Many of the more highly visible experi-
cooperative gains ments have not been sustained.
• agree as to the union’s share in terms of in- • Pressure from domestic and international
come and security from the gains of coop- competition increases the likelihood of
eration new, transformative contract language.
• Forcing does not necessarily reduce the
likelihood of new, transformative contract
Cutcher-Gershenfeld, Joel (with MIT at time
language, but fostering is needed.
of article, now with University of Illinois,
Urbana-Champaign, Institute of Labor & Indus- • Positive action at one level increases the
trial Relations) and Kochan, Thomas (MIT), likelihood of positive action at other lev-
“Taking Stock: Collective Bargaining at the els, but positive action at all three levels is
Turn of the Century,” 58 Industrial and Labor needed.
Relations Review No. 1, 3 (October 2004) • Management and union representatives re-
port the same phenomena differently.
This article examines two sets of FMCS data and • Management representatives were higher
draws three broad conclusions: on IBB than union representatives in 1996
and 1999, but both were a little less positive
1. The transformation of labor-management
on IBB in 1999 than 1996.
relations depends on aligning efforts at
three levels (workplace, collective bargain-
ing, and strategic)
Cutcher-Gershenfeld, Joel (with MIT at time
2. The aligning factors are readily identifi-
of article, now with University of Illinois,
able:
Urbana-Champaign, Institute of Labor & In-
a. workplace practices supporting worker
dustrial Relations), “A Five-Phase Model for
use of skills and knowledge
Examining Interest-Based Bargaining” in Kochan
b. negotiation processes encouraging prob- & Lipsky, Negotiations and Change: From the Work-
lem-solving and producing contract place to Society (Cornell 2003), p. 141
terms that support ongoing innovation
during the contract term Simultaneous interest-based bargaining (IBB)
and demonstrating vigorous representation to
c. joint strategic level interactions support-
constituents is complicated. Traditional bargain-
ing ongoing innovation
16 ing is more consistent with the latter and can
IRConcepts A publication of Industrial Relations Counselors, Inc.
prevent the other party from trumping your inter- initial positions, and exploring in IBB may well
est-based approach with a power move. But tradi- have increased the number of issues contemplat-
tional bargaining doesn’t easily address a number ed at the time of opening. There needs to be joint
of issues (e.g., quality, work and family, strategic recognition that it’s time to narrow. The process
investment). FMCS data indicates the use of IBB entails identifying connections between issues,
is growing, as is the preference for IBB over tradi- “what if” exchanges, agreeing to criteria to evalu-
tional bargaining, but the latter is not growing as ate options, etc. It’s tough—the forcing/fostering
fast as the former, and management is more favor- balance is very much in play, at least some trust
ably inclined to IBB than unions are. is needed, maybe the other party was only talking
IBB as a façade.
The five phases follow. Success in one phase de-
pends on the results in the prior phase and sub- Agreeing isn’t just the falling of the final dom-
stantive results are dependent on success with ino. The effort to come up with the words may
the process. reveal there wasn’t a meeting of minds. Even if
there was, finding the right words isn’t always
1. prepare
easy. Moreover, the constituents have to buy in,
2. open
and they may have reservations to the effect that
3. explore the IBB process is too cozy.
4. focus (package development)
The parties’ relationship and bargaining process
5. agree
is not immune to external economic, political,
Preparation entails morphing positions into and social winds.
interests, which entails intra-organizational bar-
gaining. First, constituents have to accept the use
of a nontraditional approach; second, they have Heckscher (Rutgers), Maccoby (independent
to be willing to evaluate the outcome in win-win, consultant & author), Ramirez (HEC [a French
rather than win-lose, terms, giving some weight business school]), & Tixier (Institut d’Etudes
to the relationship. Politiques de Paris), Agents of Change: Crossing the
Opening in IBB avoids the traditional overstated Post-Industrial Divide (Oxford 2003)
positions. It can strongly influence the balance
between the issues to be forced (traditional, This is a book about reconstructing systems of
distributive bargaining) and those for which relationships, focusing on labor-management
fostering the relationship is a significant consid- relations. The authors’ experiences with four in-
eration, as well as overall forcing/fostering atti- terventions provide points of departure:
tudes with respect to the negotiations. • Maccoby’s work at AT&T, including work-
Exploring is the effort to visualize a potential place restructuring and worker participa-
deal and where the land mines are. In traditional tion and involving unions in operational
bargaining, it is usually done off stage by the planning
chief negotiators; in IBB, it’s open brainstorm- • Ramirez’ involvement with redefining the
ing with whole bargaining committees. The strategic direction of the Italian State Rail-
openness helps produce win-win solutions but road
can be problematic in terms of constituent ex- • Heckscher’s efforts to facilitate strategic
pectations. The tension between forcing and fos- dialog between unions and management at
tering can hamper exploration. Lucent Technologies
Focusing is trying to gel the vision of a potential • Tixier’s efforts to help the French electric
deal. It’s less significant in traditional bargain- monopoly and its unions deal with the
ing because the perimeters there are defined by pressures of opening markets
17
IRConcepts A publication of Industrial Relations Counselors, Inc.
There are lessons here for unions and manage- CWA withdrew from the Workplace of the Fu-
ment and for neutrals trying to assist the par- ture program.
ties. Although the authors would likely contend
There were benefits from participatory efforts in
(and may well be right) that the parties cannot
the workplace, and managers and union repre-
be successful without non-party intervention, I
sentatives gained insights as to their behaviors
have tried to collapse the lessons into what the
and relationships from the operational-level dia-
parties need to do. And, although the book de-
logs, but there were gaps and challenges:
rives lessons from all four interventions, only the
AT&T and Lucent cases will be discussed in any • Less than a third of the workforce was in-
detail here. Finally, the authors are pessimistic as volved.
to whether the parties and/or interveners have • Athough some management bonuses were
the knowledge and/or ability to do what needs related to WPoF participation, measures
to be done. and rewards for managers weren’t fully
aligned with the program.
Organizations have stakeholders, and there is
a need for some form of organized stakeholder • The strategic-level board did not meet reg-
relations to maximize mutual gains. It’s not ularly, and the union did not participate
just about labor-management relations. It also in decision making at that level.
involves relations between top and middle man- CWA attempts to organize newly acquired
agement, national and local unions, companies units were resisted, causing distrust.
and customers, environmentalists, etc. But in la- • The relationship between corporate labor
bor-management relations there are fundamen- relations and line management in the new
tal obstacles: union-free units became strained.
• Other key management supporters of col-
• management visualizing leadership in a
laboration left.
non-bureaucratic way
• union visualizing member job involvement Had AT&T’s new management bought into the
without weakening the ability to fight when WPoF vision, the results it was producing and
necessary the momentum it was gaining would likely have
• union acceptance of responsibility for the changed the story.
effectiveness of the company
Zooming in on Lucent
• management taking responsibility for max-
imizing employment security Lucent carried WPoF from AT&T, but the cli-
• an environment requiring radically more mate for collaboration was more difficult—ex-
speed and flexibility than in the past treme industry turbulence, fundamental man-
agement strategy shifts, and major divestitures
Successful collaboration requires cooperation at and layoffs.
three levels: strategic (institutional/corporate),
In this context, management did not regard
operational (divisional/SBU), and doing (work-
WPoF as very important. Assurances that union
place).
membership would remain relatively constant
Zooming in on AT&T: “Cooperation is did not prove to be true. Management’s view was
not enough.” that while business growth was a shared respon-
sibility, membership was a union concern.
The unions were never significantly involved at
the strategic level. After intensified competitive There was a process for involving unions in dives-
pressure, the acquisition of non-union compa- titures. The company paid for two financial advi-
nies, and management turnover leading to less sors picked by and responsible to the union. The
neutrality and support for collaboration, the unions input to bid specifications. The advisors
18
IRConcepts A publication of Industrial Relations Counselors, Inc.
looked at the bids and reported to the union. security could be worth consideration. The em-
The union could meet with potential buyers and ployer would invest in employees’ marketability,
could tell the company their preferences. Finally, either internally or elsewhere.
the union negotiated a CBA with the buyers and
For the most part, the parties were not able to re-
severance with Lucent while the buyer and Lu-
construct their relationships, but they did learn
cent negotiated on sales terms.
to cooperate and solve problems more effectively
Management fragmentation, lack of HR/LR within the framework of the processes they were
clout, and lack of middle management experi- trying to change. Management did not buy into
ence with a dialogic role hampered dialog, as did the notion that the union could actually add val-
union identity as combating management, lack ue and certainly did not want to see the union as
of resources and skills to engage in business dia- a more powerful force within the firm.
log, internal politics, fragmentation between the
Interparty similarity is discoverable. Setting
national and locals, and a history of being reac-
aside management wishful thinking that the
tive rather than proactive. In addition to the dif-
union will go away, interdependency is also dis-
ficulty of changing interparty relations, each par-
coverable.
ty had difficulty changing intraparty relations.
CBAs work by stabilizing relations for a period
Zooming out of time, but this is inconsistent with the need for
Three basics: flexibility and rapid adjustment required by the
business environment.
1. There are no off-the-shelf solutions; the
parties have to tailor the approach to fit The old industrial relations system is no longer
their situation. viable. Obstacles to stable and trusting labor-
management relationships include:
2. Rational self-interest is not the whole nine
yards; the history of the relationship may, • opening of markets
and often does, lead to “irrational” behavior. • weakening/delegitimation of unions and
3. The approach has to be systemic—looking government regulations
at inter-, intra-, and extra- party relation- • corporate focus on knowledge and service
ships, including environmental influences. value-added
The parties also need to have dialog on how • a big increase in reorganizations and strate-
they want to have dialog. But, dialog alone gic re-focusings
isn’t enough. Patterns of behavior that were • more empowerment of frontline knowledge
appropriate at one time can persist after the workers
situation has changed. Each party needs to re- • co-productive arrangement blurring for-
flect on its self-image in relation to the other merly clear organizational boundaries
party as well as on its image of the other. Then,
it may be possible to change the situation Corporate strategy needs implementation, and
through trial and error, not in one fell swoop implementation requires the involvement of
but one bite at a time. stakeholders, and stakeholders contribute value.
The need for effective collaboration within a firm
A common understanding of the past and not is as great as that between firms. The old loyalty
incongruent visions of the future are necessary for security tradeoff is no longer an adequate lu-
to be able to work together in the present. bricant for collaboration. The shift in emphasis
A vision of joining forces to overcome a threat to from traditional to interest-based bargaining
the survival of both parties hasn’t proved to be helps but is alone not sufficient. Although there
enough. A future involving, among other aspects is no clear light at the end of the tunnel, the need
of the picture, a shift from job to employment to keep striving for it is clear.
19
IRConcepts A publication of Industrial Relations Counselors, Inc.
McKersie (MIT), Eaton (Harvard, Kennedy are even marginally affected, consultation
School), & Kochan (MIT), Interest-based Nego- should precede a decision.
tiations at Kaiser Permanente, MIT Sloan School • If one party has little, if any, interest in the
Working Paper 05-4312-03 and IWER Working outcome and no particular expertise on an
Paper 05-2003, downloadable without charge issue to be decided, informing is adequate.
from http://ssrm.com/abstract=413101 • In the absence of consensus, mandatory
bargaining subjects will be resolved in ac-
This paper deals with the negotiations involving cordance with contractual and legal rights.
the establishment of the “partnership” between On non-mandatory and non-contractual
Kaiser and the coalition of unions with which it subjects, management has the sole respon-
bargains. The analysis concludes with the 2001 sibility and right.
contract. Twenty-six locals representing 70,000
employees and a variety of bargaining unit types The objectives of the Partnership are: [1] improv-
were involved. There is considerable focus on do- ing the quality of health care, [2] expanding KP
ing national and local bargaining “at once.” Al- membership and market share, [3] improving
though not explicitly stated, the article’s bottom performance, [4] securing employment security,
line seems to be that interest-based negotiation [5] making KP a better place to work, and [6] in-
(IBN) defines the relationship and roles. volving employees and union leaders in decision
making.
The parties bargained again in 2005 (after the ar-
ticle was written). Information on 2005 from the There seem to be three levels of union-manage-
union coalition may be found at www.bargain- ment organization:
ing2005.org and www.impartnership.org.
1. A national “strategy group” co-chaired by
The toughest issues were union security, em- KP’s VP for Workforce Development (prob-
ployment security, and the scope of shared de- ably the most senior HR official) and the Di-
cision making. Union security was resolved by rector of the union coalition, supported by
agreement on management neutrality and card a staff unit, and including about 50 union
check. Employment security was resolved by and management leaders who meet several
agreement on a goal of providing “maximum times a year, plus a third-party consultant
possible employment and income security jointly selected by the parties.
within Kaiser Permanente and/or the health 2. Regional union-management teams
care field.” The meaning of this language was 3. Service area (business unit?)/facility union-
subsequently clarified. management teams
The agreement on the scope of shared decision
The national level unit reports to a senior man-
making included strategic initiatives, quality,
agement group and the coalition’s governing
member and employee satisfaction, business
unit. Interestingly, the management group con-
planning, and business unit employment issues.
sists of two groups representing different com-
Specifically:
ponents of KP’s business. The authors look at
• Decision making is to be governed by two this and the union coalition as partnerships, in
criteria: [1] the degree to which the parties’ addition to that between the company and the
constituents or institutional interests are coalition.
likely to be affected, and [2] the level of ex-
After the Partnership Agreement was signed, the
pertise or added value the parties can bring
parties decided to separate Partnership activities
to bear.
from collective bargaining, but subsequently ad-
• If either party’s vital interests are likely to
opted an approach involving a single integrated
be affected, consensus should be used.
national negotiation, allowing retention of local
20 • If constituent or institutional interests
IRConcepts A publication of Industrial Relations Counselors, Inc.
agreement expirations, and a series of decentral- • up-front understanding of the subject mat-
ized task forces focusing on particular issues. ter being addressed by each decentralized
task force, and sharing their results with
Eight internationals with 25 locals were involved.
each other
Almost 400 union and management people and
20+ neutral facilitators were involved. There were • keeping late night sessions to a minimum
bargaining task groups on [1] wages, [2] benefits,
[3] work/life balance, [4] performance and work-
force development, [5] quality and service, [6] Rubinstein, Saul & Heckscher, Charles, both with
employee health and safety, and [7] work organi- Rutgers University, “Partnerships and Flexible Net-
zation and innovation. These groups reported to works: Alternatives or Complementary Modes of
a centralized Common Issues Committee. Labor-Management Relations?” in Kochan & Lip-
sky, Negotiations and Change: From the Workplace to
In the end, there was a reversion to quasi-tra-
Society (Cornell 2003), p. 189
ditional bargaining in a nine-hour marathon
session.
The partnership model is defined to mean one in
Features of the contract included:
which workplace relations are modified to sup-
• card check at new locations port employee value-added participation in prob-
• a trust fund to diffuse the Partnership lem solving and decision making and to involve
(including training), funded in part by 6- union leaders in high-level business strategy.
cents/hour employee contributions
• joint determination of staffing Partnerships have experienced problems where
technologies and markets are changing so fast
• flexibility subject to seniority and union ju-
that flexibility becomes management’s dominant
risdiction
goal. Unions’ need for voice and employment se-
• open communication
curity do not resonate in harmony with keeping
• non-punitive corrective action procedures the firm’s boundaries flexible.
The parties believe the contract facilitated im-
Lessons from the Saturn experience (before it
proved patient care, delived in a more participa-
came unglued) included:
tory, cost-effective manner. The first-year cost of
growing the Partnership (training and Partner- 1. The perception that union involvement in
ship staff) was estimated to be $12 million, about running a business is a legitimate role, con-
half coming from employee contributions. sistent with trying to ensure the long-term
job security of its members
Success factors include:
2. Joint development of risk and reward for-
• educating bargainers and ratifiers in IBN mulas
• enabling each side to withdraw and bar- 3. Co-management requiring a new set of
gain toward the expiration dates of existing skills for union leaders (all members re-
agreements quired a minimum of 92 hours of training)
• when parties find it difficult to agree on 4. Strong support for the model required
general standards or criteria for settlement, from corporate and the international
focusing on agenda items that must be re-
5. The local needing to be able to both do the
solved in order to reach agreement
partnership stuff and vigorously represent
• accessing reliable data individuals
• consistently communicating the final deal Employment security implies training of exist-
to avoid multiple interpretations ing employees when new skills are needed and
• tracking what’s going on at all levels can also be inconsistent with efforts to focus on 21
IRConcepts A publication of Industrial Relations Counselors, Inc.
core competencies and get other companies to go away and never come back. And so we are
do complementary non-core work. skeptical, to put it mildly, when people tell us
how much they like us.
There may be more opportunity for partner-
ship with respect to higher value-added work And while Steelworker representation is in fact
than lower. As to low value-added work, man- good for a company and most assuredly critical
agement’s interest in stringent cost control is at for the survival of the industry, for now, I will not
variance with the union’s basic interests. As to bother trying to convince you of that.
high value-added work, employees need more
I will save my thoughts on the virtues of Steel-
business understanding, and their security can
worker representation for the after-dinner speech,
be enhanced by enhanced mobility. Hence, em-
when you have had something to drink—actually
ployers, unions, and government have an inter-
a lot to drink—and after I have offered definitive
est in investments/alliances that will enable em-
proof of the existence of the tooth fairy and per-
ployees to add to their value and organizations
suaded you to register democratic and vote for
to have better access to necessary talent.
John Kerry.
Instead, at least for now, let’s agree to have an
Appendix A honest and open relationship, based on clear
thinking and mutual respect. Let’s not pretend
Ron Bloom, Special Assistant to the President, that our interests are identical, but let’s agree
United Steelworkers of America, remarks to Steel that we have enough in common to work togeth-
Success Strategies, the Plaza Hotel, New York, NY, er on projects of mutual concern.
June 22, 2004.
Rule Number Two: We can accept your mis-
This morning I would like to share with you, sion—but only if you accept ours.
Eight Simple Rules for dealing with the United We can accept the mission of the industry’s own-
Steelworkers of America, A Word from my Spon- ers—making a return on their investment; the
sor and A Cautionary Tale. mission of management—running successful
First, let me of course thank Peter and the folks companies, lowering their handicap and mak-
at American Metal Market for inviting me to ing a buck or two along the way; and the mission
speak to you here today. I have looked over the of the various lawyers, accountants, investment
program and it seems quite interesting. There bankers and others—feeding off the industry
seems to be a good balance—forty-seven speak- while contributing nothing—except of course for
ers from the companies and one from the union. Peter Marcus—but we will not do so, unless, in
Seems about fair. exchange, you accept our mission—representing
workers.
Anyway, here we go.
Our mission is to represent every non-manage-
Rule Number One: We are not looking for ment employee in the steel industry, and we can
love, or even particularly to be liked, but we never have a stable relationship with an industry
do demand respect and not just in the morn- stakeholder who does not accept this basic rai-
ing, or when you need us, but all day long. son d’etre of our union. How could we?
Now we understand that the people who own As I said earlier, we do not expect that if all other
steel companies, the boards of directors who things were equal, you would want us to grow
operate the companies on their behalf and the and prosper. But, all other things are not and
management that the boards employ all agree never will be equal.
that they would strongly prefer that their em-
ployees not be represented by the Steelworkers You need us to accept your mission in order for
Union and that life would be better if we would you to succeed and while it would be nice for you
22
IRConcepts A publication of Industrial Relations Counselors, Inc.
if we would accept your mission without you ac- be assumed to have made an affirmative choice
cepting ours, unfortunately for you, that deal is to buy them that day—either because they actu-
not available. And the deal that is available—we ally did or because they chose not to sell.
accept you, you accept us, is better than the real
But those shareholders feel absolutely no obliga-
world alternative.
tion to make the same decision tomorrow. There
So, take the deal and let’s move on. is and under our current rules, can never be, real
commitment or loyalty from a shareholder to a
Rule Number Three: We seek a level playing
given company or the industry.
field, which to us means that we oppose com-
petition based on hourly labor costs. We be- Management, while somewhat more long-term
lieve that this is in every company’s general oriented—still has genuine mobility and can usu-
interest but we understand that it is in no ally be expected to depart for greener pastures if
company’s specific interest. the price is right.
It doesn’t take an MBA from Harvard or a PhD Customers and suppliers—while some have long
in metallurgy to figure out that if everyone pays histories with a particular company must also
their workers $25 per hour and you can get away have limited loyalty. After all they have their own
with paying them $20, you will make a little shareholders to please.
more money. The problem is, number one its
Workers, however, are truly the one constant in
unfair, which I know you do not find terribly rel-
the life of an enterprise. The average turnover
evant, but I figured that I needed to at least say
at most steel companies are about 3% per year.
it, and number two that advantage only works
Many public companies have shareholder turn-
until everyone else ratchets their wages down to
over of that amount in a morning.
the same level and the cycle starts all over again.
So when we say that these are our mills we say it
Companies that win in this industry should be
the truest sense of the word—no one cares more
those that build a sustainable advantage based
about them or is more dedicated to their success
on better technology, better quality, better man-
than we.
agement, or better strategy, not those who figure
out a way to short-change their workforce. After all, possession is nine-tenths and in the
union we always round up.
The reality is, left to your own devices, you will
eat each other up in a race to the bottom and in Rule Number Five: We may forgive, but we
the process do nothing but make your custom- never forget and it’s always personal.
ers rich. We do, as I have indicated, have a lot at stake
We are the glue that holds this industry togeth- here. We genuinely suffer when steel companies
er, that forces you to reach for those elusive bet- fail and the mills close and we are therefore pre-
ter angels of your nature. And you should thank pared to go more than the extra mile if we believe
us for it. that you are genuinely interested in the company
and its future.
Rule Number Four: These mills are ours.
But conversely, if we conclude that your con-
The steel industry has many stakeholders but
cerns are purely about personal aggrandizement,
none of them are as completely committed to its
about making a quick hit and leaving us hold-
success as the Steelworkers Union.
ing the bag, or if we conclude that you do not
For holders of financial assets—particularly respect our members or their institution, we will
shareholders—everything is based on the mo- fight to protect ourselves with every weapon at
ment, there is no memory and no future. Every- our disposal.
one who owns shares in a publicly traded com-
And we think we are pretty good at it. Ask the
pany when the market closes on a given day can
23
IRConcepts A publication of Industrial Relations Counselors, Inc.
shareholders of US Steel, ISG, Allegheny-Tech- For the overwhelming majority of the twentieth
nologies and Oregon Steel about the value of century the industry first tried in every way pos-
peace with the union. And ask the shareholders sible to prevent our existence and then, when our
of AK about the price of war. coming became inevitable, tried to focus on min-
imizing the liability which they believed us to be
People often tell us that their antagonism toward
by disagreeing with everything we said, rejecting
our members and us is just business and that we
our ideas because they came from us and trying
should not take it personally. I worked on Wall
to put us into the narrowest box possible.
Street for ten years so I understand that way
of thinking. You screw me on Monday, I screw For a while we played along. We checked our
you on Tuesday, we both screw everyone else on brains at the door and did what we were told and
Wednesday through Friday and we all meet for a no more. While this approach brought decent
round of golf on the weekend. wages and benefits, it also produced a failed in-
dustry, with catastrophic consequences for liter-
For us it does not work that way.
ally hundreds of thousands of innocent people.
Although when you tell us to not take it person-
Recently, an enlightened few have come to un-
ally we will often nod and smile, don’t be mis-
derstand that the union as a contingent asset can
led. For us, it is always personal because—news-
be made both real and in fact quite large; that
flash—we represent persons, and the decisions
steelworkers, with the confidence and security
you make impact real people with real husbands
that can only come from the protections pro-
and wives and children, trying to pay real mort-
vided by a collective voice, are in fact capable of
gages and lead real lives. So when we are passion-
contributing an enormous amount to every facet
ate and emotional, do take it personally—because
of the business.
we mean it that way.
It is axiomatic to note that no one knows how
We do not seek confrontation and we never start
to run a steel mill better than those who do it,
a fight. But we cannot do our job if we retreat
but the adoption of this simple insight is the
when challenged.
only reason there is still integrated steelmaking
The choice is yours. in America today. And those who have truly em-
Rule Number Six: With us—you get what you braced this philosophy are those whose future is
deserve. brightest.
Our members run our union and we have great Put it another way, you get the union you de-
faith in their ultimate wisdom. This does not serve.
mean that our leaders are afraid to lead. We are Rule Number Seven: We often have signifi-
often far out in front of our members at a given cant negative power; we seldom have as much
point in time. positive power.
But do not expect that we will act in a manner This negative power evidences itself most clearly
that is divorced from the fact that ultimately, in restructurings but extends generally to situ-
the Steelworkers Union is about giving working ations where any significant change is required.
people control of their own lives. And we are not afraid to use that power.
But how that democratic impulse is expressed is But we have also learned that negative power only
largely up to you. takes you so far, that to truly build something,
Think of us as a liability and a contingent asset. to create an economically viable enterprise to op-
The size of the liability and whether or not, and erate our mills, we need positive power as well.
to what degree, the asset becomes real is in your And in order to exercise positive power, we have
hands. discovered, requires partners. And so, we have
24 formed partnerships with management and with
IRConcepts A publication of Industrial Relations Counselors, Inc.
capital providers to create these enterprises. And of course we have the wonderful spectacle of
the fact that in 1946 six of the ten highest paid
We think the record is pretty clear—a combina-
executives in the entire country were employed
tion of the union’s negative power with the posi-
by the Bethlehem Steel Corporation. Gee, I won-
tive power of management and capital providers
der if that attitude had anything to do with how
is the best route for first creating and then sus-
things eventually turned out for the sharehold-
taining both economically viable companies as
ers, bondholders, workers and retirees at that
well as a viable industry.
company.
And so we are looking, as I said earlier, not for
More recently, some folks made a few shekels
love, but for long-term strategic alliances with
betting on those ratty old LTV assets and its no
providers of capital and those skilled in the art
good workforce and finally we can brag that our
of management who want to join us in building
industry has produced the owners of both the
an empire in steel.
largest and the most expensive private residences
Andrew Carnegie—where are you when we need in the world.
you?
But in the end, despite, or maybe because of
Which brings me to some of that, this industry has not created a vi-
Rule Number Eight: We represent workers able model for long-term success for its stake-
not consumers and we understand that over holders.
the long run it is a lot easier to extract mo- Now I at least, want to keep doing this for a
nopoly rents—which we most assuredly wish while—I don’t think my old partner really wants
to do—out of an industry that is making at me back anymore—and while one could make
least some profit. an argument that the best thing to do is find
We do not accept the market as the proper ar- enough dumb money for one more round, the
biter for wages, hours and working conditions. Union’s horizon is a little longer.
The proper arbiter in a civilized society, one that We understand that the steel industry needs long-
believes in a middle-class, is collective bargain- term financial success if we and our members are to
ing. prosper. We think this requires three things.
But we recognize that in a capitalist society, over First, individual steel companies must have com-
time, if capital does not earn a return it will stop petitive cost structures. In this area, we have and
showing up. And so our members, in their own will continue to do more than our fair share.
self-interest, want to work for companies that
Second, we need a stable industry structure and
make money. The more the better.
that means consolidation. While America con-
An honest reading of the history of the steel in- tinues to have too few steel mills, it has far too
dustry would tell you that capital has not in fact many steel companies.
done very well. On a cumulative basis the world’s
Now we understand the implications of that
steel industry probably did not make a profit in
statement for the long-term job security and
the twentieth century.
prospects of steel industry CEOs. And unlike the
Now I certainly am not saying that nobody has fate of many of our members, we are prepared to
ever made a buck investing or working in steel. have much of this done through attrition. But in
There was this fellow named Carnegie who did the end, if we want to have a stable industry, we
OK, and Rockefeller did pretty well on his in- need to have just a few companies, each of whom
vestment in Colorado Fuel and Iron (although has enough presence in the market that they can
he did have to endure some libelous accusations have a bargaining as opposed to a begging rela-
about a small misunderstanding in Ludlow). tionship with their customers.
25
IRConcepts A publication of Industrial Relations Counselors, Inc.
So guys, take one for the team. We have. It is obviously true that if there were no steel in-
dustry, there would be no Steelworkers Union.
And finally, we need a political environment that
What may be less obvious but is in fact just as
supports both the making of steel and the mak-
true, is that in America today, sisters and broth-
ing of products that consume it here in Amer-
ers, if there were no Steelworkers Union, there
ica.
would be no steel industry.
Which brings me to the word from my sponsor.
And on that note, let me end with a cautionary
Whether we like it or not, the steel industry’s tale.
fate here in America depends on the willingness
There are three men walking through the forest—
of the federal government to insist that global
an Englishman, a Frenchman and a Steelworker.
trade in steel is conducted on a level playing field,
They are set upon by savages who capture them
something which today we should all be able to
and take them to their leader. The leader an-
agree, does not exist.
nounces that the men are to be killed and their
And we all should be adult enough to admit skin used to make canoes but because these sav-
that the fact that the active and retired mem- ages are decent, they will allow their captives to
bers of the Steelworkers Union reside at ground both choose the method of their death and to
zero of the so-called battleground states and have the honor of taking their own lives.
that our union has an incredibly sophisticated
The Englishman goes first. He requests a pistol,
political organization, is the only reason that
puts it to his head, shouts “God save the Queen”
our pipsqueak little industry, an old-economy
and shoots himself.
dinosaur, many of whose participants can best
be described as HMO’s with steel company sub- The Frenchman steps up next. He asks for a knife.
sidiaries, representing less than one-half of one “Viva La France” he cries and slits his throat.
percent of the American economy, has received
Finally, the Steelworker steps forward. “I want
the attention it has.
a fork,” he says. The chief is a bit perplexed but
It sure isn’t our charm and good looks, ample agrees to honor the request. The steelworker then
though they are. takes the fork and madly starts stabbing himself
all over his body.
Yet there are companies in the industry, I dare
say some of whose representatives are sitting in “Screw your canoe.”
this very room that, while they oppose in every
Thank you.
way the union’s mission of representing their
workers, are more than willing to reap the ben-
efits of our hard work.
Shame on you! But more importantly—shame
on your owners for letting you be so shortsight-
ed.
We should all be deeply resentful of these free
riders. In the Union everyone pays dues because
we know that if one is allowed to ride for free,
all will want to, quickly leading to the weakening
of the institution and everyone’s eventual disad-
vantage. This is, of course, a principle everyone
in this room understands and accepts as being
at the core of civilized society. Taxes are not and
cannot be voluntary.
26